The left wing party in Greece just won the election, the 64 million dollar question would be whether they would get 151 votes to form a majority government. Many had already started talking about a Grexit ("Gr eek e uro e xit") and actually a lot of European nations would like to see Greece's exit. Tomorrow would be a very interesting day for the market, we may see a drop of 200+ points in DOW earlier in the morning, only see it rebounds afterwards.
If for some reasons there would be indeed a possible large market drop tomorrow which would spill over to the BDC sector and cause PSEC to drop 2% or more, it would be another great buying opportunity to add more PSEC, IMHO. (I don't believe it would drop that much unless oil drops badly)
ECB's 1.1 trillion euro buying of their sovereign debts in months to come (till Sept. 2016) would certainly help pushing up the European stock markets, and may result in the rally of our market. The only major negative factor would be the continued drop of crude oil price and judging by the current global demands and supplies, I believe crude will continue to fall below $40 but I do not know where the bottom would be.
Therefore, the overall US stock market, IMHO, would become more volatile and the BDC sector especially those BDCs that contain large oil/energy related holdings would experience continued volatility. However, the risk of buying and holding good BDCs for the long term (1-2 years) is now very acceptable especially many of them have sustainable yields that are greater than 10% and are selling with huge discounts. I would be adding a lot of them if there is another minor correction. I like MAIN at under 27; PSEC at 8 or lower; FSC at 8 or lower; GARS at 14 or lower, GAIN at 7 or lower. There are so many good BDC buys right now, every one would be a winner in about 1-2 years. Now of course I can be wrong.
(4) However, the biggest reason for the latest rally of precious metal I believe was probably due to ECB's 1.1 Trillion Euro of sovereign debts buying. What they did would not help the economy of Europe at all but simply delays the inevitable. Our Fed still holds about 4.2 Trillion US bonds on their book and sooner or later they have to dump them. They may have to raise rate soon. Japan already had the biggest QE. In short, every central banks was competing in the devaluation of their currencies. Everybody was so afraid of deflation right now and sooner or later when oil price starts rebounding, inflation would be here. I was kind of shocked to see prices at fast food restaurants such as Backyard burgers had started rising. Groceries prices had been rising despite low oil price. I believe the ultimate cost of Obamacare may push us into a recession by 2017. After that we may have another inflation like that in 1982. It would be good to have some physical gold or silver, IMHO.
(3) Historically, the ratio between gold and silver should be around 1:50, as a matter of fact, the face value of the one oz. gold eagle is $50 and that of the 1 oz. silver eagle is $1. Right now gold spot is about 1,295.40 and silver spot is around 18.40, that is a ratio of 1:70 which, IMHO, is totally unreasonable.
Therefore, if the price of gold should be at around 1,300, then the appropriate price of silver should be at $ 26;
if the silver spot is indeed 18.40, then the appropriate gold spot would be at $920.
(2) Nobody really know how much physical silver are out there, but a lot of the previous inventories, had been consumed (for solar energy products, etc.) Not too long ago, the U.S. Mint had troubles in obtaining enough silver for the production of its 2014 ASEs and had to temporarily halt the sales of ASEs. The short fall will get worse.
The silver ETF, SLV, is supposedly holding actual silver but nobody can confirm the actual silver holdings it has, which are supposedly stored in 5 vaults at Wells Fargo. They never did a complete inventory and only spot checked. Only certain dealers can exchange a minimum of 5,000 units of SLV for physical silver. Average stock holders cannot. The price of SLV has been 5% below silver spot, that may mean whoever exchange their shares of SLV 1:1 for physical silver may earn an immediate 5% return. There did not appear to be any requirements in when to add physical silver even if more shares are sold. In short, SLV is very iffy and has a 0.5% service fee to be paid by selling off its physical silver. It was not governed by the 1940 investment act like other ETFs.
There are a lot of reasons for the price of silver went up so much lately and some I can think off hand are:
(1) The paper silver price was rigged. Some believe that for every 250 troy oz. in paper silver there is really only one oz. of physical silver exists. If everybody who is holding paper silver would demand silver delivery, there is simply not enough silver.
I have been buying a lot of US silver coins these past two weeks:
ASEs, 90% silver coins.
For 90% junk silver coins, I had to pay around $14 for each face value while the melt is around $13.18 (at spot of 18.30); more for barber quarters.
2014 US silver eagles now rose to around $22 each (postage included). I was lucky to grab a few at 20.17 after I bid on many lots. More lucky my smart friend got a special offer from the place he ordered a lot of coins, we both bought 20 2015 ASEs for $400. At spot of 18.30, that was a great deal.
Morgan and Peace silver dollars each contains silver with melt at around $14.27, yet I do not believe you can find one at less than $20. I believe the demand for them had far exceeded supplies.
The left wing party in Greece needs 151 votes to form a majority government. It would be interested to see if the US market will go down just like I had predicted. My DXD would come in handy but most important I would like to buy a few good BDCs in bargain prices. Get your money ready.
Hi, phi: Thanks for the recommendation of XOP but after taking a look at it, it was actually very volatile and highly risky. It may be a good trading stock for gamblers but just too much risky for me trade it. IMHO, it is actually more risky than most MLPs or SCO. Thanks though. J
Greece will have an election this Sunday, tomorrow, and if the left-wing party wins, it may have a negative impact on global markets including the US market and the market may drop 1-2% on Monday. After that, the ECB's 1.1 Trillion bond buying will have a positive impact on the US market. However, as long as more details of PSEC's spin off are not disclosed, there would not be significant price movement of PSEC and shareholders should remain patient. Also, after the death of the Saudi King, while oil prices temporarily rose, it soon continued its tanking. Based on current global supply and demands on oil and Saudi's new king would continue their policy in not reducing oil production, IMHO, oil price will continue to tank until the next OPEC meeting on June 5 or Sept. That means there would still be a lot of head winds for many BDCs especially those that contains high % of oil/energy related holdings (e.g. PNNT, AINV), therefore, we would continue to see volatility on the BDC sector. Therefore, if PSEC by any chance drops to closer to $8, it should serve as a buying opportunity.
I am not so sure anybody can accurately predict the future trend of oil and if they happen to get it right, it would probably be due to luck than anything else. I am not so sure oil inventories would change direction in six weeks unless all of a sudden Saudi, Iran and other oil exporters would agree to significantly reduce oil production or we would see a tremendous drop in rig counts in US. I do not believe we would see any major changes till June 5 when OPEC will meet. Now once oil does rise, if history is correct, it would indeed recover rapidly and many of those who watched oil on the side line would miss out. Just look at VLO which had raised their dividend by 45% and its price rose sharply today. I like both XLE and HFC.
May be a good move. I was tempted to grab some KCAP and even my smart friend asked my opinions on it. I just had not followed it closely and therefore reluctant to buy.
Well, DOW all of a sudden started dropping and closed down 141 points and DXD rose 1.62%. Good that I followed my own advice and added more DXD. If the Greek election went the wrong way this Sunday, watch out for Monday. Everybody has a great weekend.
Strange as it may sound, I have to agree with slick, because of the increased production of US Shale oil and Iran plus Saudi's refusal to reduce oil production, oil price will continue to tank.....Sorry.
I really believe you all should consider adding some HFC if you do not have a position. It has been climbing back strongly.
I have to kowtow all of you who decided to long oil today and wish you all luck. I was surprised to see SCO rose back today after it tanked to around 94 yesterday in the AH after the death of the Saudi king. I still had not seen anything changed that would push oil price up. (Sorry) Therefore I would not want to get caught in a long position especially a 3x long on oil. I would like to buy back some SCO at around 92 if I can because I simply cannot see oil being bottomed out till OPEC's next meeting on June 5. My smart friend though it would not happen till this Sept. Of course, we both could be wrong. I do believe many BDCs are now very very underpriced, with a 25% upside potential by the end of this year. I had added more AINV today.
Valero just raised its qtr dividend 45%, from the previous 0.275 to 0.40. I wonder if HFC and other US oil refineries may follow suit?
By the way, HFC, after reaching its 12-mo low of 30.15 on 1/15/15, has steadily rebounded, trading at around 33.70 today, a rise of 11.8%. It remains one of my largest oil-related holdings.